Written by Luciano Silva, Isabela Franciscon and Marina Andrade, International Policy Centre for Inclusive Growth (IPC-IG)

 

Countries across the globe have been deeply affected by the COVID-19 pandemic. It goes without saying that informal workers and firms, regardless of their income level, were more likely to suffer income or asset losses than formal workers during the pandemic [1] (Timmer et al. 2020). This is mainly due to their much lower level of access to social security, which is generally more available to formal workers via mandatory schemes. Indeed, informal workers and firms are often more deprived from access to social protection, frequently associated with their lack of coverage by social insurance and/or contributory schemes owing to various legal, financial or administrative barriers. Moreover, part of the informal workers are not “poor enough” for poverty-targeted social assistance benefits. For these reasons, this group of informal workers is often described as the “missing middle”, as they are neither protected through social insurance nor social assistance (IPC-IG 2020, Nguyen and Behrendt 2021).

It is worth reinforcing the importance of reaching this ´missing middle´ when (re) designing social protection measures, especially during crises. In South Asia [2], the discussion concerning the informal sector and the missing middle gains even more relevance as, prior to the pandemic, more than 80% of South Asia’s workers engaged in informal activities, and more than 90% of the region’s businesses were informal. The numbers are as high as 95% in Afghanistan (Burattini 2020). Even in many formal firms, a non-negligible proportion of the workforce consists of informal workers. In Pakistan and in Bangladesh, for example, informal workers are the majority within formal firms (Timmer et al. 2020).

It is also important to bear in mind that in South Asia, in general, social assistance aims to cover the poorest quintile within populations. Further, social insurance coverage rates tend to be very limited, leaving most workers excluded. [3] In Nepal, for instance, the social insurance system is mostly composed by pension schemes for public employees, leaving the private sector with only a small coverage (Franciscon and Arruda 2020a). Those two factors combined result in low social protection coverage to non-poor informal workers (IPC-IG 2021).

The COVID-19 pandemic intensified consequences of very low social security coverage of informal workers in South Asia. In India, by April 2020, over 44% of informal workers were without a job. Within the informal sector, casual or temporary wage workers were more likely to lose employment than self-employed workers, regardless of industry, location, education, or caste. While the poorer were the most severely hit by the crisis, many informal workers in the middle of the income distribution also underwent large drops in job-related earnings. In Bangladesh, India and Pakistan, the poorest third of the population involved in the informal economy lost 9%, 13%, and 16% of their incomes, respectively. As for the middle third, they lost 11%, 7% and 16%, respectively (Timmer et al. 2020).

Table 1 shows that South Asian countries heavily relied on social assistance measures (61% of the total), followed by labour market measures (31% of the total) in responding to the COVID-19 crisis, according to the IPC-IG online dashboard. India (19), Sri Lanka (12), Bangladesh (12) and Pakistan (11) were the countries that implemented the largest number of measures. Concerning social assistance, the majority of the policies put in place consisted in cash transfers [4], in-kind transfers and liquidity alleviation measures [5]. As for labour market measures, the focus was also on cash transfers and liquidity alleviation, but also on resilience of the health sector [6]. Table 2 below provides more details on what kind of social protection support governments in the region resorted to in order to mitigate the effects of the COVID-19 pandemic.

 

Table 1. Distribution of social protection measures by country

Data source: IPC-IG. 2021. Social protection responses to COVID-19 in the Global South Online Dashboard.

 

Table 2. Type of social protection support by country

Data source: IPC-IG. 2021. Social protection responses to COVID-19 in the Global South Online Dashboard.

 

While the online dashboard does not explicitly identify social protection responses that covered the ‘missing middle’, as defined above, it does identify those covering ‘informal workers’ and ‘formal and informal workers’, as well as ‘poor and vulnerable households’ and ‘vulnerable individuals’. In this blog post, the measures that covered informal workers, and informal workers jointly with other groups, were considered as proxy for measuring coverage of the missing middle in the social protection responses to COVID-19 mapped by the IPC-IG. It is assumed that measures that target poor and vulnerable families are likely to be reaching poor informal workers. This leaves responses that target near-poor and non-poor workers that do not have formal links to the labour market to be identified using the two ‘informal workers’ target-groups’ categories available in the database and cited above.

With that being said, Table 3 sheds some light on which groups were more targeted in the social protection measures implemented by the South Asian governments. As expected, informal workers, at first glance, do not appear as the most targeted group (4% of the total).  Although this share might be higher, as it is likely that poor informal workers fall under the poor and vulnerable category, a high share of the missing middle is likely to remain excluded. This finding illustrates the importance of designing policies to reach this specific group who is quite often “invisible” to many public authorities.

 

Table 3. Target groups by country in South Asia

Data source: IPC-IG. 2021. Social protection responses to COVID-19 in the Global South Online Dashboard.

† The total number here diverges from the total number of measures shown in table 1, as subsidies and some other measures with non-defined target groups are not being considered, and some measures can target more than one group.

 

The following cases exemplify the diversity of social protection measures adopted as responses to the COVID-19 pandemic by the governments of South Asian countries and their potential (or limitations) to reach the missing middle:

Bhutan

Despite important social protection responses to deal with the effects of the COVID-19 pandemic and, to a limited extent, its inclusion of the missing middle, the country did not put in place measures that specifically cover informal workers who are not members of poor households, leaving behind most of this often-neglected group. The main social protection measure adopted was the circumstantial, i.e., without links to existing programmes, cash transfer Druk Gyalpo Relief Kidu, granted to self-employed workers, workers with suspended contracts, unemployed persons and returning Bhutanese (Alvarenga and Soares 2020).

Nepal

The Government of Nepal adopted mostly circumstantial social protection measures, that did not necessarily consist in adaptations of existing programmes, with the main one being a social assistance response that focused on the distribution of relief food packages to informal workers and people living in deprivation without a caregiver (Franciscon and Arruda 2020c). Further, with the goal of tackling unemployment due to the COVID-19, and in the absence of a statutory unemployment benefit, the authorities relied on the Prime Minister’s Employment Programme (PMEP), which sought to provide 100-days waged-employment to the unemployed. It is worth noting that returnee migrant workers and informal sector workers were also considered in the measure (for more details, see the online dashboard). Although the government was attentive to the informal workers when including them in responses jointly targeted at other groups, few specific measures were directed only to them, like the relief food packages, meaning that the missing middle remained, to some extent, uncovered. 

Sri Lanka

The government resorted to its pre-existing social protection programmes and focused on covering poor households and vulnerable individuals. Amongst its existing programmes, there is the Samurdhi, composed mainly of a flagship unconditional cash transfer targeted at poor households, and also the Senior Citizen Allowance. Both were quickly expanded, both horizontally and vertically. It is estimated, though, that circa 31 per cent of the households in the middle quintile – likely with members working in the informal sector – remained excluded. (Franciscon and Arruda 2020b).  Related to it, informal workers were only considered along with formal workers for a special loan scheme for the festive season. Therefore, no particular measures were designed exclusively for them.

Pakistan

Similarly to Sri Lanka, Pakistan also expanded its existing social protection programmes to deal with the dismal effects of the COVID-19 pandemic. Notably, the government announced Ehsaas Emergency Cash—an expansion of Ehsaas, an unconditional cash transfer to safeguard food security. The initiative aimed to reach 16.9 million households (almost half the population), many of which had informal workers as members, who likely did not have access to social protection Second, the Rozgar scheme provided subsidised credit to cover firms’ payroll in exchange for a commitment not to lay off any staff for up to six months (Markhof, Arruda, Franciscon and Arif, 2021). It is worth mentioning, though, that informal workers in the case of Pakistan were considered along with other groups, in particular vulnerable individuals and poor households (vide the Ehsaas programme). In this sense, it is likely that the missing middle was, to some extent, excluded in the set of responses carried out by the government, as informal workers, especially non-poor informal workers, were not clearly targeted.

India

The Government of India announced the Pradhan Mantri Garib Kalyan Yojana (PMGKY), relief package to provide support to poor and vulnerable people and ensure that their basic needs are met. The package comprised both the implementation of new social protection interventions and the adaptation of pre-existing benefits. The only measure designed specifically for informal workers was the loan scheme to street vendors, aiming at providing them with enough resources to restart their businesses which had been severely hit by the pandemic. Other measures considering informal workers were also taken, but alongside other groups like formal workers, vulnerable individuals and poor households. Some of the measures are: (i) financial support for 23 million construction workers from the Building and Construction Workers’ Fund managed by state governments;  (ii) Garib Kalyan Ann Yojana, providing food grains free of cost to each poor family per month; and (iii) relief rates concerning the insurance scheme managed by the State Insurance Corporation. (Bacil and Soyer, 2020).

 

The pandemic has illuminated major blind spots in the labour market, corroborating the need for better protecting unemployed and precarious workers across a range of contexts, including strengthening, establishing, or rethinking unemployment insurance, social assistance, and their interactions for workers in non-standard employment, the self-employed and informal sector workers (Gentilini, 2022). Even though governments in the region responded to the challenges posed by COVID-19 through different interventions, South Asian countries could benefit from taking further steps to ensure universal social protection coverage, including the missing middle. Expanding social protection coverage, during normal times to include unprotected groups is of utmost importance for improving crisis preparedness. In this way, when a shock occurs, national social protection systems will be able to respond quicker, mitigating the adverse effects and leaving no one behind. (Soares, 2022).

 

References

Footnotes

[1] This does not mean that formal workers were not hit by the pandemic. In fact, they were also very much affected with suspensions, reduced working hours and pay, and changes in work arrangements.

[2] Countries being considered: Afghanistan (AFG), Bangladesh (BGD), Bhutan (BTN), India (IND), Maldives (MDV), Nepal (NPL), Pakistan (PAK) and Sri Lanka (LKA).

[3] According to the ILO’s World Social Protection Monitor, the population covered by at least one social protection benefit is the following: Bangladesh (28.4%), Bhutan (8.8%), India (24.4%), Maldives (21.2%), Nepal (17%), Pakistan (9.2%) and Sri Lanka (36.4%). There are no data for Afghanistan.

[4] Includes: (i) adoption of emergency cash transfers, (ii) temporary expansion of pre-existing programmes; (iii) extension of unemployment insurance (social insurance); and (iv) wage subsidies paid directly to employees, self-employed workers or indirectly to employers (Soares 2022).

[5] Includes: subsidies for families and businesses (e.g. postponement of water and electricity bills and/or rent payments, and/or temporary reductions or waivers) as well as subsidies for workers and employers (e.g. postponement and/or temporary reduction or waiver of social security contributions, taxes or loans payments) (Soares 2022).

[6]  Includes: temporary health insurance and/or wage incentives for healthcare workers as compensation or to attract more workers (Soares 2022). 

Social Protection Programmes: 
  • Social assistance
  • Social insurance
  • Labour market / employment programmes
Social Protection Building Blocks: 
  • Policy
    • Coverage
Cross-Cutting Areas: 
  • Health
    • COVID-19
Countries: 
  • Afghanistan
  • Bangladesh
  • Bhutan
  • India
  • Maldives
  • Nepal
  • Pakistan
  • Sri Lanka
Regions: 
  • South Asia
The views presented here are the author's and not socialprotection.org's